APCO Refutes WSJ Article on IRR

Executives at the $2.4 billion APCO Employees Credit Union in Birmingham, Ala. have refuted the way their credit union was portrayed in the Wall Street Journal and the Birmingham Business Journal.

Following a roughly 40-minute interview with APCO leadership, the WSJ reported in a June 5 article, “Credit Unions Ramp Up Risk,” that APCO had recently piled its assets into more long-term investments. A similar article containing many of the same facts from the WSJ story was published in the Birmingham Business Journal the following day.

“The Wall Street Journal article was critical of us. It made it look like we were piling into long-term investments, which we are not and I do agree with Jim [Blaine]. We are conservatively managed. We’re got tremendous liquidity and that is an important part of our business model,” CEO Merrill Mann told CU Times on Friday.

“The article did have a little bit of a blindside because we did have a good discussion for 30 to 40 minutes, but he picked out one or two sentences that would fit the agenda to support the story that credit unions are piling in long-term risk in investments, and that’s actually incorrect for us,” Mann said.

Jim Blaine, CEO of the $28 billion State Employees’ Credit Union in Raleigh, N.C., wrote in a personal blog post the NCUA hurt APCO’s reputation.

“Unexpectedly, by 3:00 o'clock in the afternoon; the ‘playing with matches’, political recklessness of ‘some boys and girls’ in Virginia had lit a bonfire under APCO's home office, threatening to torch the reputation of the largest credit union in Birmingham,” Blaine said, calling APCO one of the best run credit unions in the nation.

CFO Blane Mink said he is not sure if the NCUA suggested the WSJ contact APCO, or if the reporter decided to contact the credit union on his own.

“I told Mr. Mann the reporter had insisted too many times that no one at the NCUA had told him to call us. He mentioned that three or four times. That concerned me because he said it over and over. He was protesting too much,” he said.

NCUA Public Affairs Specialist John Fairbanks told CU Times no one at the NCUA pitched WSJ on the story or suggested any interview subjects.

NCUA Board Chairman Debbie Matz was quoted in the original WSJ article, and re-reported by The Birmingham Business Journal, as saying that she is concerned the agency’s message on interest rate risk is not getting through, or credit unions are listening but choosing not to do anything about the issue.

Mink told CU Times the credit union had significantly shortened the duration and maturity of their investments. Mink said WSJ sent him an extremely complicated spreadsheet of data it said it had sourced for the story. Mink said the article ran before he could examine what the reporter was using as his evidence.

“I was a little surprised by the headline of the article. It told us how the article was going to be tainted and biased and then certainly pulling one sentence out of a 40-minute conversation and then indicating that this credit union was piling into long term investments was not fair,” Mink said.

In WSJ, Mann said the credit union would likely hold on to its long-term investments instead of selling them at a loss.

"You can't avoid risk," he said. "We do try our best to mitigate risk in the best possible way."

Mann told CU Times APCO has to win in any interest rate scenario.

“We’ve got to win if interest rates go up. We’ve got to win if interest rates go down. We’ve got to win if interest rates stay the same. We can’t bank on interest rates going up and that’s what the NCUA is asking us to do – to bet on interest rates going up and they’ve been wrong for the past six years,” Mann said. “That’s a little bit concerning to us. We’ve got to continue to make money and provide value. We’re not extending risk or anything like that.”

Mann mentioned that CUNA presented APCO with the 2013 member benefits top performance award at the trade group’s annual Governmental Affairs Conference for delivering more benefits to members than any credit union in the nation.